Republicans passed a student loan bill last week that would permanently tie student interest rates to the market rate–making those rates reflect the true cost of borrowing. How the White House responds to this bill will tell us a lot about the president’s true intentions, and whether he truly has students’ best interests in mind.
The question is: Will Democrats allow the student loan interest rate to cease being a political tool for them each election year? I doubt it, but Republicans are trying to to do what’s best for students here, by allowing the interest rate to reflect the true market cost of borrowing, rather than having it be set by Congress in arbitrary (and highly politicized) fashion.
The Washington Post reports the details:
The House approved a Republican proposal Thursday to allow interest rates on federal student loans to rise or fall from year to year with the government’s cost of borrowing, ending a system in which rates are fixed by law.
The proposal cleared the GOP-led House on a largely party-line vote of 221 to 198, but it faces opposition in the Democratic-controlled Senate and a veto threat from President Obama.
The legislation responds to a looming deadline: On July 1, unless the law is changed, rates for a certain type of new loan for undergraduate students in financial need will double to 6.8 percent, from 3.4 percent.
Last year, facing a similar rate-doubling deadline during his reelection campaign, Obama pushed Congress to freeze the 3.4 percent rate for one year…
“The market is a much more reliable determiner of the true cost of capital than a bunch of us sitting around taking a guess,” said Rep. John Kline (R-Minn.), sponsor of the bill and chairman of the Education and the Workforce Committee.
Read the full story here.
Obama spent a lot of time on the campaign trail last year telling students how much he cared about them, and how much he wanted to keep student interest rates at their temporary low rate, while Republicans wanted them to revert to the higher (originally agreed-upon) rate. For Obama, student interest rates were just one more carrot he could hold over the nose of young voters. But now that Republicans have voted to lower the rates and permanently tie them to the market rate, Obama is threatening to veto. That shows you that his interest maintaining the lower rates was only ever political.
Like most Democrats, Obama loves voters to look to him as the great provider-in-chief. His expected opposition to the new Republican student loan bill is just the latest example of Obama’s politics of dependency. He doesn’t want to lose the power to control interest rates because that gives him a wedge issue with young voters that he believes he and fellow Democrats can use to their political advantage.
When young people look to politicians as provider/protector, the dividends for politicians at the ballot box are huge, but the public interest is seldom best served. The president and his fellow Democrats should put politics aside and support the Republican bill, which, in effect, is not very different from Obama’s policy circa 2012.
Do Democrats truly want to make student interest rates fair, tied to the true cost of lending, or are they merely interested in their own political advantage? This bill is a test of their true intentions.